United Therapeutics Corp (UTHR) 2002 Q4 法說會逐字稿

Good morning and welcome ladies and gentleman to the United Therapeutics fourth quarter and 2002 year-end conference call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. At the request of the company, we will open the conference for questions and answers after the presentation. If you wish to access the replay after the call has ended, you may do so by dialing 1-800-428-6051 or 973-709-2089 with an id number of 286468. Our remarks today concerning United Therapeutics may include forward-looking statements, which are based on United Therapeutics' beliefs and expectations as to future outcomes. These expectations are subject to risks and uncertainties, which may cause actual results to differ materially from anticipated results. Such risks and uncertainties are described in United Therapeutics' periodic reports filed with the Securities and Exchange Commission. I would now like to turn the conference over to Dr. Martine Rothblatt, Chairman and Chief Executive Officer; please go ahead Sir.

Thank you very much. Good morning everyone and thank you for joining us on our Annual Financial Results conference call. I am extremely pleased to share with everybody the good news that annual revenues now top $30m for United Therapeutics, and our annual loss has dropped to just over $1.00 per share as stated in the press release. And once one excludes losses on investments that we described in our second and third quarter conference call, our actual loss per share is down to about 44% of that level or almost about $0.60 a share and that neighborhood. So, I think that these are clearly very good financial results for United Therapeutics and evidence of our continuing march from being a research and development company that was once losing over $2.00 a share, to a commercial company now at around a $1.00 per share loss, and our goal of course, is to become profitable just as quickly as possible.

At each of our conference call, since our commercial launch, I promised all of our listeners to give the four key numbers, which I think really parameterize our business right now. Those numbers being the total number of patients on Remodulin, the total number of reimbursable patients on Remodulin, our current annual revenue run rate, that is a number of reimbursable patients times our average reimbursement per patient, and the average reimbursement per patient. And those numbers, as of January 31st, were 550 patients worldwide; that's about 10% increase from the last conference call. Number of reimbursable patients has grown to 410 patients, that's 60 more patients than three months ago. Annual revenue run rate has increased to $36m, that's 20% up from three months ago. And the average reimbursement per patient hovers around $88,000-$89,000 per patient per year. So, it's a slight increase from a few months ago. I am pleased to have with me on this conference call two of the most important executives in our company, Dr. Roger Jeffs, who is our President and Chief Operating Officer and is also responsible for overseeing all of our clinical programs and Mr. Fred Hadeed who is our Chief Financial Officer and is also responsible for overseeing all of our reimbursement and distributor economics. So I'm now happy to open this conference call to any questions that may be directed either to myself, to Dr. Jeffs or to Mr. Hadeed.

Thank you. The question and answer session will begin at this time. If you are using a speakerphone please pick up the handset before pressing any numbers. Should you have a question please press star one on your pushbutton telephone. If you wish to withdraw that question please press star two. Your questions will be taken in the order that they are received. Please stand by for your first question. Once again, should you have a question, please press star one on your pushbutton telephones at this time.

Our first question in queue comes from Steve Saberph) with Kilkenny(ph) Capital, please state your question.

Yeah, hi. Thanks. Could you actually break out the Remodulin numbers either for the, through the year, for the quarter and could you talk about how much of that, is there any stocking going on anywhere in Europe or in the United States that would have to, would affect Remodulin sales going forward? Thanks.

Hi, Steve, I don't think that there is any significant stocking going on beyond that which is required in our distributor agreements, which are depending on the agreements something like 30 to 60 days, maybe 90 days in a couple of the instances required advance purchase orders. So, either with the two US distributors, Priority Health Care or Accredo(ph) Health Services (ph) , either of those two, I don't believe any significant amount of stocking going on.

In terms of the breakout of the patients, we are seeing a substantial increase in the number of patients that are coming from Flolan. At our last conference call we had reported, I believe, eight medical centers had experienced in transitioning patients from Flolan to Remodulin. On that total, is now over 25 different medical centers have experienced in transitioning from Flolan to Remodulin. And there is a healthy buzz, I think, in the patient community of people on Flolan, wondering when their doctor will feel it's appropriate for them to transition to Remodulin.

Okay, as to follow up with that, what would it, what do you think it will take to get the remaining patients of that 550 that are not reimbursed to being reimbursed? What needs to be done? And also, do you have any actual sales Remodulin through the year other than the run rate?

Yeah. The answer to your first question is, it will take European approval, because virtually all of those patients are in Europe where we don't yet have approval and in Israel. The answer to your second question is that the actual on Remodulin revenues for the year topped $21m. And I think, that's a really exciting number, given that we just launched the drug in the middle of the year.

Okay thank you.

Thank you our next question in queue comes from Martin Auster with SunTrust Robinson Humphrey, please state your question.

Thanks, that's an excellent quarter.

Thank you, we appreciate that we feel the same way.

Yeah definitely. I would like to know if you can give me a little more I guess feel for where the patients are coming from if there is a way kind of distributed; how many of those patients were kind of newly presented PH patients, how many were combination therapy and where do you see those trends going on forward? Thanks.

Sure Martin, I can tell you that the most of the patients were newly presenting patients, who their physician chose to put them on Remodulin first rather than Treclear(ph) or Flolan because of the particulars of those patients. As you know, Remodulin is the only therapy approved by the FDA for class II, III and IV of Pulmonary Hypertension. So, we have a fairly wide net to cast in terms of capturing newly presenting patients. The second largest group of patients came from patients that were already on Flolan and the physicians decided that the patient was an appropriate candidate to transition to Remodulin. The reasons for that range from the patients just having difficulty with the Flolan delivering system for example suffering recurrent [Inaudible] infections or just having some difficulty with some of the side effects of Flolan such as debilitating leg pain, its a common one, or alternatively the physician believes that the patient is stable enough and healthy enough that there is a de minimus risk in moving them from Flolan to Remodulin.

And I think that to answer your kind of second question I think that's were are lot of the growth is going to come in the future as more and more physicians gain comfort in transitioning patients from Flolan to Remodulin. They will take those patients who are doing well on Flolan and realize that they won't be putting them in any danger by taking them off of that drug and putting them on Remodulin. And finally, the third group of patients are ones who have fail to improve on oral therapy and Treclear which is the only approved all oral therapy does not [inaudible] the pivotal trial result in improvement in about 55% of the patients. So that becomes a new group of patients that can be considered to transition to Remodulin. I think that we are beginning to see that now because the first patients who have been on Treclear long enough for them to see either no improvement or in fact see a frank declination in their clinical status are now becoming available to transition either to Flolan or Remodulin.

As a follow up, about how many doctors have experienced switching patients from Flolan and Remodulin and then in the quarter of those 60 patients, is it fair to think of about maybe 5 to 10 of those patients are switch patients?

First of all answer to your first question is over 25 doctors now have experienced in switching patients and by the way that's out of a total reasonably you know high presciber community of just 75 doctors. There is really only 75 doctors that account for about 80% of the patients, 70-80% of the patients. So, we are making significant headway in that community. And in terms of the numbers, its, we don't really have yet an ability to parce the patients down to the 1, 2, 3 about half point of each one but I think that a good rule of thumb would be if you could divide the pie in three pieces. In terms of the new Remodulin patients. The largest piece are newly presenting patients, the second largest piece are Flolan transitions and the third largest piece are Treclear.

Okay, if I could ask just one final thing and then let somebody else in. Could you give any kind of clarity at all on discontinuation rates or maybe what a gross patient was for the quarter, is that possible?

You know we have got some data now cumulative over the past half year

[edited without the benefit of audio from this point forward]

and the growth each month is approximately 30 grossed adds, around 10 deaths or discontinuations and that's what results in our net 20 patient growth per month.

Okay thank you very much.

Thank you, our next question in queue comes from Terry Challenger(ph) with [Inaudible], please state your question.

Good morning. Congratulations on a great quarter.

Thank you we are very excited.

I was wondering, I have got actually a few different questions but I was wondering if you could go into little bit more detail on the status of European approval and the different countries, I know we are expecting France(ph) can you give us an update on that and then maybe if you can give us an update on how the clinical trials are going, the IV trials in specific, specifically not for the Critical Limb Ischemia?

Great. What I would like to do is to have that question answered by Dr. Jeff because you touch on areas one, regulatory affairs is headed by our Vice President, Dean Bunce who's done a great job of getting us approvals around the world. Dean reports to Dr. Jeff (ph) , the IV, I think you mean the Phase IV by the IV, so the Phase IV trial is also being managed by, among other, Vice President, Mike Wade. Dr. Wade also reports to Dr. Jeff and also the critical limb ischemia area is also under Dr. Jeff. So, Roger, if you could answer all those questions?

Okay Martine. Thanks for the questions Kelly. In Europe, I think, it's still under active review; we are addressing some unique issues that are unique to the fact that it's a European rather than an US filing. But there are issues that we have well in hand. We can't honestly predict when the approval will come. Since it's in a regulatory environment and these things are difficult to predict. But, we are encouraged that it is still tracking very positively. As to the clinical status of our trials, the Phase IV study, we have three patients in it right now out of a need of 100. And it's little slower than we had hoped and principally the reason for slow enrollment is patients and physicians, ethical concern about transitioning potentially to placebo from Flolan. So, there is some hesitation, if you will, in the patient's and physician's mind about withdrawing an effective therapy and putting them on a placebo.

Having said that, the three patient's status [at] end of the trial has gone as expected and two of the patients have completed the 8-week under (ph) the study have transition to commercial Remodulin. And I would emphasize that the hesitation that exists is with the study and not with the therapy. Because, [Inaudible] have chosen not to participate in this study, having said some of our lead (ph) transition centers in terms of transitioning patients from Flolan to Remodulin. So, it's really more of a study-related issue rather than a drug issue. The critical limb effort is just now sort of getting underway and we are beginning enrollment in those trials. We are still expecting to complete those studies by the end of the year; these are small. Proof of Concept studies of chronic dosing of Remodulin in patients with critical limb ischemia. Principally the design of these studies to look at wound heeling and other outcome measures such as in a non-surgical patients, patients who can't, these limbs are so bad and vessels are so poor (ph) , they can't undergo vascular surgeries, look at limb salvage type (ph) end points and then in patients who can undergo a vascular procedure such as a bypass graft, we are looking at a junctive(ph) treatment of those patients for up to three months. And then looking at those outcomes in terms of wound heeling, benefits and quality of life such as the ability to walk and also other things such as improving the surgical wound and [Inaudible] of the graft, and things like that. So, based on positive results from those studies, we'll then launch into pivotal trials in the next year.

In that critical limb ischemia trial, should we expect to see data on that, will you present that data or show us the top-line in the press release?

We'll probably present in a meeting forum, rather than in a press release. It would be late in the year, if not pushing into next year since we'd have to submit that and get approved and present it at the meeting.

Okay. And then, I thought that there was a trial going on with IV infusion?

Yeah, we are aware of; it's not a company-sponsored trial. We are certainly not approved for intravenous use and we don't promote its use that way. We are aware that there is a 3-center trial of doctors at Columbia University, Rush-Presbyterian, and Duke University looking at the chronic effects of IV Remodulin and they are, as I understand it, looking at two-patient population. One is, they are going to try to switch some patients from Flolan to IV Remodulin and the other population of patients they are going to study, is newly presenting patients that are in sort of Class Four, put them directly on intravenous Remodulin. Those trials, we understand, I think there has been a patient that's enrolled, I think, it's a 20-patient study and the data from those trials certainly will take some time to accumulate, but we are interested in the result as you are, but certainly don't promote it's use that way, but the results will be interesting to see.

And just back to the European approval. Can you just give us a little bit more granularity in terms of what we can expect to see from different countries, I mean, when do you expect for France to come on, Germany that kind of things, kind of your next biggest markets?

We've gone through a procedure called mutual recognition. So, France is our reference member state, involving France(ph) first and to get into directly European Union, you have to have approval in France. So, it's sort of a gating event. It's extremely difficult to predict when regulatory decisions get made, particularly in a marketplace like France, where there isn't a sort of a statutory fiduciary requirement that the things get done by certain timeline.

Nonetheless we would, we are still positive it will happen in the first half of the year and then once that happens it will then go through mutual recognition, which that itself will take another six to nine months. So, we hope in the first half of this year to have French approval and then we'll broaden [inaudible] that into the other European Union territories. We have also filed outside of those EU countries, Switzerland, we expect, we filed there and are expecting a decision sometime soon. We filed in Australia and then we are also now beginning a fairly major effort in Japan. And we are going to do the virgin studies necessary to get Japanese approvals, since that is the third largest market in the world.

And there's a host of other filing globally in South America, Asia, Eastern Europe, all over the place, which are all being filed simultaneously. So, there is a lot of regulatory activity that again, these things, as you know, are difficult to predict from a timing sense.

Thank you, Doctor. Our next question comes from Dan Brady(ph) with Presidio(ph) Management. Please state your question.

Yeah, I have several, if I can squeeze them in. What are the other sales? I know you have some kinds of supplies and things, could you describe that business for a moment?

I'm going to transfer that call to, that answer to Fred Hadeed, because we've mentioned, he's responsible for overseeing all of the different reimbursement activity.

Good morning, Dan. First, our revenue numbers for the year were approximately $21m in Remodulin drug sales, approximately $3.5m in pumps and supplies related to the therapy, approximately $4m in telemedicine sales, about $1.5m in Arginine(ph) sales, that gives you the $30m for the year. And for the quarter the numbers were approximately $10m in Remodulin drug sales, $1m in telemedicine sales, and about $1m in Arginine sales.

Okay. In this category, and together, what kind of ongoing revenue stream do you see that providing you? If you did about 9m in 2002, what would be a good figure for 2003 and beyond?

I think that the number that we feel right now real comfortable with is our Remodulin revenue run rate...

I don't mean Remodulin, I'm talking about the other categories.

The other categories, well, we would at the moment forecast them moving forward at their fourth quarter figures with, you know, some reasonable growth in the range of 10-20%, something like that for the next 12 months.

So, your fourth quarter was $2m, telemedicine and Arginine one each?

Yes, that's correct.

Okay, and then on the Actelion conference call, they admitted to a 20% drop-off rate, which is pretty interesting, considering that the drug has been on the market for just a year. They didn't break that down, but obviously I would think that they would have a considerably smaller group of people, they need a Remodulin or Flolan that died during treatment. One would think that when started with Treclear and it became apparent that the patient was worsening that they would move to either Remodulin or Flolan. So, that, when imply that a good number of Treclear patients are going off therapy, relatively small proportion are dying. But, [Inaudible] , if they have 5000 patients on now, we are talking about, 700-800, maybe as many as 1000 patients going off therapy. Do you have any idea where they are going? It sounds like you should be getting quite a few of them as well?

We really can't comment very knowledgably, Dan, about the details of the Treclear dropouts. But I can give you some color that may help all of us have a better understanding of the situation. First and foremost, pulmonary hypertension is a deadly disease and a lot of patients unfortunately die from it. Even on a Flolan therapy, the mean survival is about five years. So, I share your sense that one would think that there would lots of number of death on Treclear, but I don't know that for a fact and I do know again about (Audio-gap) color that a number of patients are put on Treclear outside of the scope of the Class II, Class III label. (Audio-gap) you know so that's on the label. You know, so, that's some, you know data point there. A second data point is we did become aware of an article in the Pink Sheet publish that covers FDA regulatory action that commented on that there was an FDA letter transmitted following upon some possible CHF use of Treclear and so we don't know whether those 5,000 patients that you mentioned are all pulmonary hypertension patients or in fact what number of them are CHF patients. And of course, we would not think if they dropped off, a CHF patient, dropped off. It would end up on Remodulin. A little bit more color for you is we do have some insight into growth in Flolan just because we are out visiting every center, talking to all the doctors. And Flolan numbers have been increasing since both Treclear and Remodulin were approved. But very gradually and at a slower rate than they were increasing prior to approval. So, that would say that there was not huge inflect of Treclear patients pouring on to Flolan either. Perhaps, you know, one logical conclusion is that hopefully many of those patients are not dying. And that probably some number of them may not have PH.

So, they might have, the CHF, [Inaudible] all the CHF patients, dropping off, Treclear therapy might be more than one would surmise at least initially.

Yeah that's the color that we are aware of from visiting all the medical centers.

Do you, can you, do you disclose a number of CLI patients you have using it off label hours. Is that fair question?

It's a fair question and our spirit is that just like every question is a fair question, we can't always answer them all.

Okay.

But it's a [Inaudible] at the moment. I do know that there are some doctors that are, have considered putting a patient or two on Remodulin. These are vascular medicine specialists and a very careful situation. These are the same kind of physicians that currently use Flolan on off label in special situations. But certainly once the numbers become material then, it would be our hope to be able to provide that information so that people could understand when we report reimbursable patients. How many of those are traceable to the pulmonary hypertension reimbursement rate as opposed to any other reimbursement rate. But generally we do not expect CLI patients in number until we have regulatory approval on label. And as Dr. Jeffs mentioned, he's got no fewer than three studies moving forward gathering data. And that data would be existing on top of the outstanding consensus recommendation of the Transatlantic Society of Cardiology groups. In favor of the use of prostanoids(ph) in non-surgical CLI patients. Hopefully good data in our studies combined with that consensus will result and has been able to report material numbers of CLI patients in just the next, you know, short number of years here.

Okay. And one final question and I will get off. You mentioned that there probably were 10 people, 10 patients a month that died or discontinued. Could you give us some color on what happens to these patients, those that haven't died on therapy? Particularly, a comment has been made to me that, with regard to Wisconsin Protocol, as a patient, his condition gradually deteriorates and you try to trade(ph) up the dose, the pain increases and after a while the patient started out and looked like he would be successful on the Wisconsin Protocol that after a period of time that's sometimes that's not always the case. So, in the 10 discontinued, do you see dropping off the Wisconsin Protocol because of pain and perhaps going to Flolan as a result of that?

Let me split the answer with Dr. Jeffs, because you've touched on some important clinical issues. But, I can give part of the answer and ask Dr. Jeffs to address the more clinical questions. We looked at the, over the past six months and we saw that the averages were 10 dropouts per month. We don't always get the best information on exactly why they drop out, although we try our best to collect that information. I think, a rough rule of thumb that would not take you very far wrong is that perhaps a third to at most half of those patients dropped out due to death; so, they just died. And other patients discontinued because they went on to transplant, which is a very good outcome for those patients. Some of the patients discontinued and went on to Flolan. So, there's really a, and some of them we just lose to follow up; we don't know what happened to them. So there's all those different possibilities that can occur. In terms of your question on the Wisconsin Protocol and its efficacy, I think I would like to ask Dr. Jeffs if he could [Inaudible] about that.

Ok Martine, and I appreciate the question Dan, because I think there's somewhat of a common misconception about the side pain, and that is that it's dose-related. All the data that we have, suggest that it is not dose-related, and in fact, it occurs at the first onset of therapy. So, upon initial exposure to the drug, if you are going to have side pain, it manifests itself. And really it doesn't get worse as you titrate [inaudible] the goes up. So, that's actually good news in the sense that it's not side pain itself, although it can be therapy limiting in a minority of patients. For the majority, it's not, and the reason it's not is it's well tolerated now or better tolerated now with the Wisconsin Protocol. And if we look at our patient losses, the number of patients that we lose to side pain is shrinking quickly. And I think, even in the last month we didn't lose any. So, of those 10, there was no patient lost to side pain and it was going down from before. So, it's becoming less of a reason for patient loss. My prediction is that we'll remain to be true. We have about two thirds of the patients in the States using the Wisconsin Protocol. So, I think just the abundance of it's use says enough that it's providing some relief to the majority of patients that have side pain. The other third that doesn't use it is the other unique group of patients that actually for some reason or other don't have side pain with the drug, or their pain is so limited it is tolerable with [inaudible] and other things.

So, that's I think a clear picture of the side pain story and the fact that it is really not dose-related, from all the data that we've put there [inaudible].

Thank you. Our next question in queue comes from Tim OReilly with Goldman Sachs, please state your question.

Hi, great quarter.

Thank you.

[edited with the benefit of audio from this point forward]

I noticed that the net ads last quarter were about 50 and in this quarter they are up to 60. I guess what accounts for that and do you see the net ads per month increasing, going forward?

Thanks Tim. We feel very confident with our goal of 20 net ads per month, going forward, certainly for the entire year. And we are tapping(ph) that both by having more growth fabs and by applying our scientific and medical resources to doing everything we can to reduce dropouts, by getting better understood practices in terms of the dosing of the drug, making sure patients are receiving adequate doses of the drug, that sort of thing. Though, the more that we push the growth and reduce the loss, the net effect will be, of course, to increase our net adds. I think that you know in the normal course the things can be only direction it can go is up. And there is more and more people being familiarity with Remodulin, large and larger centers are transitioning Flolan patients as Dr. Jeffs just mentioned it has been showing that the side pain is more of a patient specific thing and is not related to the dose of the drug that's resulted in keeping more patients on the therapy. As Dr. Jeffs mentioned they are just two thirds of the patient who know about the Wisconsin protocol so there is more effort to need to be done to get that out to everybody and certainly our heart felt goal is to increase that number of net adds upwards we currently stand behind goal of 20 per month.

And can you point any specific factors that increase the net add per month, this quarter I suppose to last quarter, sort of all this factors that you just said?

I think if all of those, all of those factors combined although I will say that we have now had a adequate amount of time to have our commercialization group flushed out with more people. We have now got six company employees who are regularly visiting each of the major prescribers; we have local and regional PH prescriber events every single month. Always with either you know tens or even dozens of doctors attending. We have got a very well integrated effort with Accredo Healthcare and Priority Healthcare to make sure that the distributor teams are well educated on everything. So I think that probably one of the most important factors is that our marketing effort has really had an opportunity to kick in the gear.

I see, if I can ask one quick question about the intravenous study that some investigators are performing. Could you remind us what theoretically might be the advantage of using Remodulin off label intravenously compared to Flolan?

Yes, there are three key advantages, first of all its safer of the patient because if the intravenous line becomes blocked or kinked or dislodged, which is a not infrequent occurrence of either with younger patients who are active or just older patients who turn or twist the wrong way, get something stuck in door jam or what have you. With Flolan the patient is in a severely acute imminent risk of death because Flolan has a half life of just about two minutes so it means that they are going rapidly into severe vasoconstriction. With Remodulin there is a well over an hour if not two hours of reasonable drug levels left in your blood so they have plenty of time to get to a hospital. So if I was patient on a continuous [Inaudible] therapy, I would sleep a lot easier knowing that if God forbid the worse happened, I had a couple hours to get to a hospital rather than a few minutes. That's a first very important factor.

The second factor is that the Remodulin is stable at room temperature were as Flolan is not. That means Flolan has to be shipped to the patient in separate constituents that the patients then need to mix together everyday in sterile conditions and then wrap their drug in a ice pack that, the ice pack then has to be carried around with them. This first of all uses up any where from one to two hours of time for the patient and is very inconvenient because the patient looks very medicalized(ph) walking around with his bulky ice pack all the time. So the second factor is really is one of patient convenience and that the patients will then be able to save one to two hours of their day in terms of not having to reconstitute drug under sterile conditions and will be have a pump that can be hidden in their clothing and they won't be somebody does have a, you know, a kind of a obvious badge of medicalization, which is something that most people would prefer not to have.

I think that a final point to consider is that the Remodulin intravenous delivery system is one that is likely to overall be safer for the patient as well because there is less opportunity for infection to occur during the drug preparation area itself and it is, you know, many people are just everyday Americans with busy households and kids running around house and you know to prepare drug in a sterile manner in a house, I mean that's something virtually none of us have any experience with. That's what pharmacies are for. So with Remodulin, the patients will have the additional safety factor of knowing that they are less likely to get septicemia infection because they don't have to expose the drug elements to a non-sterile environment.

Thanks a lot.

Thank you. Our next question comes Matt Teplitz with Quaker Capital Management. Please state your question.

A nice quarter. Just a couple of quick questions, I want you to try to clarify, Fred, while you were I think breaking out fourth quarter revenues it got a little noisy here and I was wondering if you could once again break out Remodulin sales and the other product sales for the quarter?

Okay, I'll be happy to. Remodulin sales in the quarter were about $10m, just a little bit under $10m. Telemedicine sales were about $1m and Arginine(ph) sales were approximately $1m.

Okay. And when we pick up service that's primarily the telemedicine?

That's correct.

Okay and where do we pick up sort of pumps and other stuff that's all captured under Remodulin?

No, pumps sales and supplies were very insignificant in the fourth quarter.

Okay. Question, there was a just a fairly significant increase in operating expenses this quarter and is that likely run rate for 2003 or any comments there?

I think the spending that you see in the fourth quarter is very predictive of the quarters to come.

Okay. And particularly R&D ramp, is that because of the new programs, was that Remodulin related? I'm just curious.

It is largely due to the new programs OvaRex for ovarian cancer as well as our Phase IV efforts in Remodulin, CLI, and Hepatitis C.

OvaRex(ph), can you give us a timetable on when do we get meaningful data?

I think that we should not expect to see data from our pivotal trial until the end of ’04. Although there is meaningful data that's for example, released in the press release that was given at the gynecological oncological meeting further supporting the fact about the Proof of Efficacy of our low-dose [inaudible] monoclonal antibody platform. So, there will be continued papers because there are a lot of doctors using OvaRex, and have experienced and are publishing it but the pivotal data that we intend to file upon should be coming out by the end of ’04.

Okay. Great. And again, I was wondering if we could sort of explore this sort of loss of ten patients net. I guess the drug grows out to 30 net loss of 10 and so the net add 20. I am kind of curious whether you know, is the ten of the thirty which you know obviously is a fairly large percentage, do you think that's appropriate way to look at it or do you think this is a sort of small numerator with a small by growing denominator. So, that sort of skewing the math right now, if you follow me. I'm just sort of wondering, do you really anticipate the one-third rate continuing?

Yeah. We just don't know which is the fact of the matter that the things that has to emphasized most of all is that we're talking about a disease here that half the people die in five years even on Flolan therapy and that's going to take its toll. Secondly, patients who are on Flolan and Remodulin are almost universally lifted for transplant. Though that activity is going to continue. On the other hand, Treclear has medicalized unprecedented numbers of people with pulmonary hypertension and has patients fail to respond on Treclear that's going to certainly have the effect of increasing the numerator for Remodulin. Secondly, there are 2500 patients on Flolan in the US and as doctors are gain more and more experience as we saw the sharp increase in statistics this past quarter, in taking people from Flolan to Remodulin, that's going to sharply increase the numerator. Our best hope is that we can keep patients alive on Remodulin indefinitely, and we hope that perhaps with combination therapies, maybe Treclear plus Remodulin, maybe Selbenofil(ph) plus Remodulin, maybe better experience with aggressively dosing Remodulin seeing that the pain is not dose related. All of these things can have the effect from keeping the patients alive longer and that really is I think the most important part of the denominator. The most of the patients we have lost, we loose overtime to death for patients who have been on the drug for two years, three years and something like that.

My other question is, is this number being skewed a bit by you know, the fact that you are obviously an active participant in the US market whereas in Europe, I guess the question is of the 10 that are lost, do those include the European, the non-reimbursed European patients?

No.

Okay so, these numbers are strictly in the US market?

I think what probably skewed the numbers unusually, for the past couple of quarters was the launch of Treclear. Because you have a number of patients, I mean here is a situation you have got, our base of US patients who are under Remodulin are doing well and the patient comes into the doctor's office with a press release saying there is a pill. They can take care of my pulmonary hypertension, take me off the pump, put me on the pill. And that's something that has happened because Treclear was just launched. So, I think that's a skewing factor for this year, which we may not see next year because that's come and gone.

I would think that's true. And last question and I will give it up. As relates to your Phase IV study as mandated by the FDA, obviously you are getting a significant number of patients effectively making the transition, but not necessarily in the context of your trial. Is there any thought or possibility of having to revisit things with the FDA to consider this mission of, just for the anecdotal data of those patients because you can quite easily get to your 100 quite quickly?

I think that's a question for Dr. Jeffs.

That's a reasonable question. I think the, technically we should be 50% enrolled by the end of June. So, have 50 patients who are tracking behind that, so our plan is to have some discussions with the agency later this spring to talk about the timeline. Either we are going to have to readjust the timeline. We will show them the things we have done to diligently try to enroll the study. In spite of our efforts, you know, we are still having a hard time doing it for the reasons that are stated. Maybe we can make further amendments to the protocol. We have done some things already or even alternatively if we all agree this was not doable, we could propose other studies potentially. But all of those would be in a longer time frame than what we currently have. So, I think the thing is we will just try to keep doing this study and we will have an opening dialog with the agency about what we are doing and perhaps what we could do better. But just make sure everybody is on the same page at all time.

I mean presumably the ethical dilemma is not lost on them?

I hope not. Certainly, they feel the withdrawal studies are something that can be done; they have done before in congestive heart failure and that's why they were eager to see us to do in right-sided heart failure. But then, certainly the investigators are having a hard time with the study. We have had sites for example that have initially agreed to the study, taken it all the way through their IRD, fought with the IRDs to get it done and then once they've actually come to enrolling patients, decided they would rather not do the study, they rather just do open label commercial transition. So, there are a lot of different times to [inaudible] by the patients and physicians. But having said that, we still, we have a couple of patients scheduled. We should be, by the end of this month, we should have five or six patients. So, I think we enroll, it, it's just going to take more time than we initially thought, both us and the FDA. So, it's something we have to discuss with them.

Okay, well thank you. Good luck and nice quarter.

Thank you, our next question comes from Stephan Patin(ph) with Sectoral Asset Management. Please state your question.

Hi. Good morning, great quarter.

Thank you, thanks a lot.

With regards to the physician sponsored IV trial, I was wondering if you just clarify how many patients are enrolled now out of the 20 that you had mentioned are expecting? And when you are expecting to see some data with regards for that?

This is Roger. What we hear is there's one patient enrolled. And the data I would expect since it's only a 20-patient trial. I think they would probably do this trial this year. So, there should be some data this year from that center. And based on the outcome of those, this trial, we may consider some formal registration studies given if the results are positive.

Okay. With regards to international, I was wondering whether you have received reimbursement in Israel and if not when you are expecting that?

I think, Fred you probably would be the best person to answer that question.

We've made various submissions for the various health and reimbursement authorities there. And we do hope to have reimbursement that is for all of Israel in the coming months.

Okay. So, this is just a wait and see now?

Pardon me?

This is just a wait and see now? It's all set aside and ...

All the balls are in motion. There are just some formalities that you have to undergo there to receive pricing approvals.

Okay.

And all those balls are set in motion. So we expect to be marketing there in summer.

Okay. And I am wondering what type of penetration you are seeing with regards to hypertension related with scleroderma(ph)?

That's a good question. We've had a larger and larger number of scleroderma physicians gain experience using Remodulin over the past quarter and we've added some of the senior thought-leaders in the scleroderma field to our Truprosanal(ph) advisory groups. And these scleroderma experts are now helping to shaping the presentation of Remodulin for the patients that have pulmonary hypertension associated with scleroderma. There also some scleroderma investigator initiated studies going on for Remodulin and scleroderma, you know, connective tissue type related diseases such as Raynaud's(ph) Disease, for example, or non-healing digital ulcers of the hand. And so, I think you are going to see more and more activity there. We have a major presence now at each big scleroderma physicians meeting and there are publications in the area of Remodulin and scleroderma, which are being worked upon and will soon be in practice.

Okay, so if this is still something that's largely ramping up.

Yeah, it's largely ramping up and it really further supports our confidence that the market potential for this drug is in the $300m to $500m a year range. And we get there because we remain confident that over time, virtually all of the Flolan patients are going to end up on Remodulin and that 2500 patients time, you know, roughly speaking $90,000 per patient per year, one's looking at between $200m to $250m per year in revenue there, plus as has been noted, Actelion has done a super job of educating the physician community about the existence of undiagnosed cases, or untreated cases of pulmonary hypertension. And if the 5,000 current patients that they have on Treclear are in fact PH patients. And if, in fact, half of them fail to improve that would be another 2,500 patients ripe for Remodulin, which would add another $200m to $250m a year of revenue potential. Many of those patients are the scleroderma patients that might think Actelion has done a superb job of really raising the profile of pulmonary hypertension in that community. So, because of scleroderma, because of our continuing penetration of Flolan market, because of the market education activities that have gone on and the high failure rates from oral drugs, the prospects of Remodulin becoming a $500m a year drug, are better than ever.

Okay, great. Thank you very much.

Thank you. Our next question comes from Steve Saber(ph) with Kilkenny(ph) Capital. Please state your question.

Yeah, hi. Just relating to the Phase IV study, the withdrawal study. Actually, you know, in my conversations with physicians and my own experiences with physicians, it seems like it is not a study that, you know, I mean, if the drug has been approved, clearly it works. And, it seems like it's been very hard for you to recruit patients for the study. And I think what I hear more, I guess, the more interesting question is, does Remodulin improve survival, as Flolan was shown to do, I mean, really the reason Flolan was approved in the first place was there was some survival benefit. And that's sort of the question, is that a question you guys are going to address in any way, and at some point is it likely you'll just maybe scale down the Phase IV trial, I mean it seems like the FDA was fairly optimistic in having you enroll 100 patients I believe was the number. I know that is a sort of speculative question.

Yes, Steve, this is Roger.

Hi.

You know, all I can say is we are going to try our best enroll study, since that's our commitment. And we will have some dialog with the agency about, perhaps, you could do things such as an interim analysis, which currently aren't planned, but you could build those things in. But, you know, are we our own worst enemy because the patients would rather just do this [inaudible], perhaps that's true. Is there a feeling that Remodulin works effectively and there's no need to do a confirmatory trial, yes that's true in a majority of centers. So, you know, we have to fight those fights, but they're good fights at least and there's no hesitancy to put patients on Remodulin, it's just hesitancy to put patients in the trial.

Right, do you have any desire to do a Remodulin versus Flolan trial?

That's a tough trial Steve, in the sense that when you do it, you have to power it to non-inferiority and the sample size becomes quite large to do it. In fact it might be unweilding [inaudible] indication to even do that type of study. In the survival advantage that Flolan saw was only in the PPH trial. In their second trial of scleroderma patients there was no survival advantage. So, there is some suggestion in some of our [inaudible] participated in the original Flolan trial that that was a fluke result.

Okay.

So, clearly, these drugs improve long-term outcome. I mean there's patients now, I think Dr. Rich is going to update his registry from a 5 year to a 10 year statistical base. We've also looked at things retrospectively at the last AJ, we showed that Remodulin at least compared to the older registry data, improved survival outcome at least predictably so by modeling. But to do that perceptively is a much larger effort, it's also a much longer effort, because what people are going to want to see is ten year survival, not five year, so to do that it would be sometime in 2013 if we started now.

Okay, okay. All right thanks for that answer. One last quick question, are you going to have presence at the ACC?

We're going to have a presence at ATS and also ACC will have an abstract there. At ISHLT will have an abstract, but ATS is really where we are focused, we are going to have five abstracts and one is an oral presentation as well. So, we're going to have our largest presence at ATS in the spring. That's sort of our most targeted meeting, because it is the most well attended by the physicians that prescribe Remodulin.

Great, thanks a lot.

Thank you. Our last question from the audience comes from Mark Adilienti(ph) with Alliance Capital. Please state your question.

Hi, good morning, everyone. Congratulations on a nice quarter.

Thanks Mark.

Thank you. The I.V. trial that is being conducted, I understand that you are not involved in it, but do they use more product in that trial than they would on the non-IV infusion?

Hi Mark, it's Roger. I'm not sure there would be a reason to use more product, I think it would be, I mean the question is are the two agents equivalent when given intravenously and certainly that's probably one of the points of the trial is if the patients, for example is on 50 nanograms per kilogram per minute of Flolan, what dose of Remodulin will they require intravenously to support themselves. So I think that will evolve and its really an unanswered question. Now we do know in patients that have transitioned from intravenous Flolan to subcutaneous Remodulin, the doses are very comparable, in fact patients tend to use slightly less Remodulin than they do of the Flolan, about 85%. So, if that bares out, given that the drug's 100% available intravenously, that should also be predictive.

So a sub Q patient versus and I.V. patient would generate the same revenue?

I would assume so.

Okay, any chance that the FDA says you had a conditional approval on your Phase IV, you've enrolled, you are way behind the timeline here, you haven't met your goal and they take away that conditional approval?

There's been a number of drugs, I think well over 30 something approved under sub part H. There's never been a withdrawal of a drug. I think it's fair to say even with companies that have not applied due diligence in meeting that commitment. Now we have aggressively applied due diligence in trying to meet this commitment from very good financial incentives to do the study for the sites(ph). I mean we pay for all of the related costs, plus something, we are also encouraging the patients that they are unfortunate to get enough pursued by, for example that will pay for their re-hospitalization when they do want a transition to active therapy. But I think as long as we are showing that we're making every good effort to complete this study that the FDA will be considered at that.

Okay, any thoughts of being proactive and going to them and saying we are well behind, are there discussions already underway?

We're planning a meeting in the spring.

Okay. That's it I guess.

That's what we're trying to do Mark, first is try our best to see our actual approval rate is. We do know for example, that we've screened over 300 patients for the trial. We've only enrolled three. So, right now it's 1%. Typically it is low when we first trials. As people may perhaps get comfortable with the concept of the study that tends to go up. So, we're in the part now where we are trying to generate statistics like that that we can take to the agency and say these are the hurdles that we face.

And lastly, any update to guidance from this quarter out, I know last few quarters, now that you are posting revenues you've given us some forward-looking guidance, any interest in updating or reiterating guidance?

Mark, we can reiterate that we feel confident of doing at least $36m in Remodulin sales, the coming year and stacking, you know, perhaps an additional $10m or so of telemedicine and Arginine sales on top of that at the current revenue run rates for those products. In addition we feel very confident to continue growing, hitting our goal of 20 net patients to add per month. By way of guidance that can, that should result in us having well over 600 reimbursable patients at year end. And the nice thing about that is that as our current reimbursement rate per patient that would result in the company having a level of revenue and margin on those revenues that is higher than our level of expenditures. And it means that we have, you know, a very, very good shot at achieving profitability sometime in the next 12 to 24 months timeframe. We have been on a steady march to profitability and to capturing our fair share of that $500m Remodulin potential. It's been two years ago, we have lost two bucks a share year ago, just past year we had a buck for share counting one-time losses and really had a, you know, $0.60 share. So, we are clearly zooming in our profitability, we have got tight controls on expenditures, we make exceptions for things like the Phase IV study because that's very important for the FDA. For sales and marketing expenditures have doubled over the past year. So we spend money where it needs to be spent and overall our goal is to keep spending well within what we know we can achieve in terms of margin on Remodulin sales and we are well focused and total believers in the fact that market capitalization's for profitable companies are much nicer than market multiples for unprofitable companies.

Okay and lastly any sales side conferences you will be at or industry conferences, you said the data that will do present in the next two quarters?

Yes, thanks for asking that Mark. We will be presenting at the Lehman Brothers Conference in just a couple weeks now, which is in Miami and then after that we will be presenting at the Banc of America Conference just about a month from now and that's in Las Vegas. So, there will be plenty of near-term opportunities plus the medical meetings that Dr. Jeffs mentioned, the ACC and the ATS.

Very good. Thanks very much good quarter.

Thank you.

Thank you, I will now like to turn the conference back to Dr. Rothblatt to conclude.

Thank you very much everybody for all your heart felt thanks and congratulations on the fourth quarter. We are, have worked very hard to achieve this and one thing that was mentioned and I will just mention briefly in closing is that all of this has been possible because of the first rate job done by our manufacturing group in Chicago, that's our factory floor having drug production which is from impeccable FDA approved quality and no problems and always building up a larger, good inventory. So we should all remember that UT manufactures its own Remodulin, it does so to exact in standards and is done so without a hiccup since we began several years ago. And also like to mention one other program that did not have any visibility in the conference call. Our microbiology platform which is being developed first for [Inaudible] has successfully completed its Phase I studies in healthy volunteers and in June we will begin enrolling [Inaudible] patients in a randomized placebo controlled double bonded Phase II studies. So that microbiology program is going on as well however all of this microbiology, [Inaudible] , Remodulin, sales and marketing, G&A, all of this is occurring within the spending threshold that Fred has indicated to you earlier. Thank all of you again for your attendance, participation, and continuing support of United Therapeutics, hope to see many of you at Lehman in Miami or Banc of America in Las Vegas.

Thank you ladies and gentlemen, if you wish to access a reply for this call, you may do so by dialing 1-800-428-6051 or 973-709-2089 with the an ID number of 286468. This concludes our conference call for today, thank you all for participating and have great day. All participants may now disconnect.